Dollar falls against the euro, other rivals

Worries over Greece’s debt continue to rile markets

WilliamL. Watts

SAN FRANCISCO (MarketWatch) — The U.S. dollar fell against most major rivals on Tuesday, with the euro finding support after having taken a recent tumble on renewed worries about Greece and on fears that Europe’s debt crisis could spread to Italy and Spain.

“Two really major trends remain rock solid and these are [U.S. dollar] weakness connected to the USA budget crisis, and the evolving Greece default,” said Richard Hastings, a macro strategist at Global Hunter Securities. “These are strongly supportive to gold while destabilizing some equities.”

The dollar index
DXY, -0.02%
which measures the U.S. unit against a basket of six major currencies, sank to 75.915, down from 76.135 late Monday.

“Although the problems are far from being resolved, Greece’s front-loaded privatization plan has helped to stabilize the financial markets,” said Kathy Lien, director of currency research at Global Forex Trading. “As a result, the euro, British pound and commodity currencies are trading higher while the dollar is trading lower.”

A stronger-than-expected reading from a gauge of German business confidence also aided the shared currency, analysts said. The Ifo Institute said its business confidence index was unchanged 114.2 in May, better than forecasts for a decline to 113.7.

But closer to home, data from the Commerce Department showing a rise of 7.3% in U.S. new-home sales for April had little impact on the euro and dollar.

Its recovery notwithstanding, the euro’s performance “comes off as particularly uneven,” said John Kicklighter, currency strategist for DailyFX.com. “Modest gains against the dollar and Japanese yen while the euro gives back all its morning gains against the Swiss franc and pound suggests there is little actual confidence in the currency’s health.”

Given this mix and the lack of progress on European fundamentals, “it is safe to say that the risk appetite trends are playing a substantial role in its price action,” he said in emailed comments.

Eye on Greece

Markets will remain sensitive to Greece ahead of a multilateral decision on further aid and amid speculation over the potential for a default or restructuring.

“I am not going to agree to this recipe which has been proven wrong,” said Antonis Samaras, head of the New Democracy party, after a meeting with Prime Minister George Papandreou, Reuters reported.

Papandreou’s government holds a large majority in parliament.

Bullard reemphasizes Fed strategy

Meanwhile, comments from a Federal Reserve official gave dollar bulls no incentive to charge.

The U.S central bank’s likely to keep policy on interest rates on hold after the second round of quantitative easing, known as QE2, to provide more time to evaluate the strength of the largest global. economy, St. Louis Fed President James Bullard said late Monday.

The Fed is likely to adhere to its commitment of near-zero interest rates for an “extended period” after QE2’s period of asset purchases expires at the end of June, he said. Read more on St. Louis Fed's Bullard.

Also Tuesday, the British pound
GBPUSD, -0.0934%
traded at $1.6177, up from $1.6110. The Australian dollar
AUDUSD, +0.0897%
bought $1.0545, up from $1.0514 late Monday.

Against the Japanese yen, the dollar
USDJPY, -0.40%
bought ¥81.90, compared with ¥81.92 late Monday.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.